A breakdown of factors influencing the cost per bag of cement in Accra

The Cement Manufacturers Association has detailed the cost drivers behind cement pricing in Accra.

According to the association, various factors contribute to the pricing, including raw materials, government taxes, production costs, and interest payments, among others.

Recently, discussions on cement prices have escalated, with comparisons highlighting how prices have risen over the past few years. Currently, cement prices range between GHC90 and GHC105.

Despite resistance from some industry players in the country, Trade and Industry Minister K.T. Hammond has justified the necessity of a Legislative Instrument (L.I.) aimed at regulating cement prices to prevent excessive profiteering by certain cement manufacturers.

Minister Hammond has clarified that the L.I. would not dictate prices but would instead promote transparency in the country’s cement pricing. The government’s plans to introduce an L.I. to oversee cement pricing have sparked controversy. Cement manufacturers, in particular, have vehemently opposed the proposal, arguing that such regulation is unnecessary in a liberalised market and is also unconstitutional.

However, an analysis of the price build-up of cement by the Cement Manufacturers Association reveals that a significant portion of the cost is driven by factors beyond the manufacturer’s direct control.

According to the Association, raw materials account for GHS33 per bag. The price of imported clinker, gypsum, and other materials are driven by global market forces and are paid for in US dollars. This exposes the manufacturer to the volatility of international commodity prices and exchange rate fluctuations.

Government taxes, duties, and levies add up to around GHS 22 per bag. In the case of duties, these are also paid in US dollars, further increasing the manufacturer’s exposure to foreign exchange risk.

Production costs make up about GHS 12 per bag. The cost of electricity and fuel, which are used to grind cement, dominate these costs. These have been subject to local inflationary pressures, which have been steadily rising in recent years.

Interest payments, depreciation, forex losses, and manufacturer net profit contribute to GHS8 per bag. These costs stem from the financial expenses associated with the plant, the depreciation of the Ghanaian cedi, and the manufacturer’s profit margins.

Finally, distribution costs amount to roughly GHS 5 per bag in Accra. These costs cover the transportation of cement from the factory to a distributor and/or retailer, as well as the distribution channel’s overheads and margins.